AutoZone and O'Reilly better positioned to capitalize on do-it-for-me trends—BofA Securities

What happened

BofA Securities analyst Christopher Nardone advises buying AutoZone and O'Reilly but rates Advance Auto Parts underperform. He says do-it-for-me sales now exceed do-it-yourself sales at the three major auto parts retailers, and AutoZone and O'Reilly are better positioned to benefit from this shift.

Confirmed

Global impact / market context

AutoZone and O'Reilly have strong balance sheets, which means they can put more cash into capital spending, such as supply chain improvements and parts availability. That can help them win commercial repair customers and grow sales faster than Advance Auto Parts.

Analyst inference

Years of inflation, high gas prices that reduce miles driven, and more complex repairs have pushed vehicle owners toward professional repair services. This shift changes where auto parts retailers earn revenue, making commercial sales the main growth engine rather than do-it-yourself purchases.

Analyst inference

What to watch

1. BofA expects double-digit commercial growth to be sustainable in the near term for both O'Reilly and AutoZone, according to analyst Christopher Nardone. Confirmed
2. Watch whether AutoZone and O'Reilly use their strong balance sheets to increase capital spending on supply chain capabilities and parts availability, as BofA's investment case suggests. Proposed
3. Track whether Advance Auto Parts loses commercial market share to AutoZone and O'Reilly, which could pressure its revenue and support BofA's underperform rating on the stock. Analyst inference

Evidence

• seekingalpha.com